Congressman Bachus WSJ piece on the benefits of an SRO for advisors sets what might be a world record for faulty assumptions, wrong conclusions and inaccuracies.

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After reading Rep. Spencer Bachus’ (R-Ala.) OpEd piece in Monday’s Wall Street Journal, I suspect that I speak for many in the independent advisory community when I say that I honestly don’t know whether to laugh or cry. Having had some experience in editing, writing and reading such pieces over the years, I wouldn’t have thought it possible to fit so many faulty assumptions, wrong conclusions and inaccuracies into a 709-word article. This has to be some kind of record.

I suspect that, like many of our elected officials, Mr. Bachus didn’t actually write it himself (if I had to guess, I’d say it was someone at SIFMA), but I’d hope that the chairman of the House Committee on Financial Services would have taken the time to read and approve an opinion piece running in the nation’s financial newspaper of record under his byline. Of course, I could be wrong.

Frankly, I’m at loss to know where to begin parsing this masterpiece of misinformation. I suppose that as Maria von Trapp pointed out, the beginning is a good place to start: “Bernie Madoff, Matthew Hutcheson. Mark Spangler… …The federal regulators whose job is to enforce the law and protect investors from bad actors often had no clue or took no notice of what was going on right under their noses until it was too late.”

At the risk of being branded a stickler in our modern “perception is reality” culture, does it bother anyone but me that two out of three of these folks have yet to be convicted of anything? As one of our national leaders, Mr. Bachus should be aware of that, and of the implications for fair trials and liability exposure should one of them be proven innocent of all charges. And, of course, Madoff was caught by regulators, was convicted and is currently serving his sentence.

More troubling, though, is the implication that regulators or law enforcement aren’t doing their jobs if they don’t prevent people from committing crimes. Sure it happens sometimes, when the good guys are very good and very lucky—such as when passengers prevented a terrorist from exploding a device on Northwest Flight 253 over Detroit on Christmas Day 2009 (prompting Janet Napolitano to declare “the system worked”). But who stopped Roger Clemens or the Olsen twins (their $300 million net worth just seems wrong, if not qualifying literally as a crime)?

But the real joke is this: “A bipartisan bill now moving through Congress could prevent such losses in the future by giving financial advisers a mandate to regulate themselves.” Although he doesn’t name this bill anywhere in the piece, we can only assume that Mr. Bachus is referring to his own proposal that FINRA take over the regulation of RIAs.

For one thing, on July 25, Mr. Bachus suspended his bill after Rep. Maxine Waters, (D-Calif.), introduced her own bill that would allow the SEC to charge user fees to advisors to fund RIA examinations. Even more confusing, though, is his implication that FINRA regulation would somehow constitute investment advisors regulating “themselves.” It’s hard to believe that anyone with even a passing exposure to the current advisor reregulation debate (and clearly, Mr. Bachus falls into this category) could fail to be aware that FINRA now fervently claims that it isn’t a self-regulatory organization at all. (As though simply changing its name from the National Association of Securities Dealers also erased its pedigree.)

If FINRA isn’t even an SRO for BDs, it’s hard to imagine a Bizarro universe in which it could be construed as an SRO for RIAs. It’s also hard to imagine in what universe one might construe FINRA regulation as client-centered, as in: “The investing public deserves better oversight of [RIAs] to whom they have entrusted their money and, in many cases, their retirement future.”

Better oversight? Really? When the reason that we don’t have a much longer list of broker malfeasance is that FINRA arbitration rules prevents such cases from being publicly disclosed? When, according to a SmartMoney’s Janet Paskin (see “Arbitration: The Odds of Beating Your Broker”), “Even investors who win [in mandated arbitration] usually receive only 50% of their claim. And that percentage goes down as the claim or the brokerage gets bigger. Throw down with one of the three biggest brokers and the likely payout is about 21% of the claim [if you win]…”

Funny as all this is, I’d be laughing a lot harder if this wasn’t the “best effort” of one of our congressional leaders to explain the “thinking” that went into what might actually become law for RIAs. At least Bachus had the temerity to share this nonsense publicly—one can only hope that clearer minds are listening.

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